Brent oil futures were steady on Thursday, hovering just below seven-week highs as escalating conflict in the Middle East raised supply disruption fears while the market awaits US inventory data for signals on the demand side.

August Brent crude rose 28 cents, or 0.3 per cent, to $85.35 a barrel by 1145 GMT.

US West Texas Intermediate (WTI) futures for July , which expire on Thursday, gained 13 cents, or 0.2 per cent, to $81.70.

There was no WTI settlement on Wednesday because of a US public holiday, which kept trading largely subdued. The more active August contract was up 7 cents at $80.78.

Oil prices are likely to remain supported around current levels because of a growing geopolitical risk premium driven by conflict in the Middle East, said ActivTrades analyst Ricardo Evangelista.

Israeli forces pounded areas in the central Gaza Strip overnight while tanks deepened their advance into Rafah in the south.

However, expectations of an inventories build appears to be overshadowing fears of escalating geopolitical stress for now, said Priyanka Sachdeva, senior market analyst at Phillip Nova.

Investors are awaiting release of US inventory data from the Energy Information Administration (EIA) later on Thursday, a day later than usual because of the Juneteenth holiday on Wednesday.

An industry report released on Tuesday showed that US crude stocks rose by 2.264 million barrels in the week ended June 14 while gasoline inventories fell, market sources said, citing American Petroleum Institute figures.

A seasonal uptick in oil demand, refinery runs and ongoing weather risks added to extended production cuts by the OPEC+ producer group mean that “oil balances should tighten and inventories should begin to draw during the summer months”, J.P.Morgan commodities analysts wrote.

Meanwhile, a gain in fuel prices on Wednesday is buoying refining margins. The ICE gasoil futures premium to Brent crude jumped to $20.63 a barrel on Wednesday, a two-month high.

Firmer fuel refining margins provide a “healthy dose of encouragement for those who have been expecting improvements on the demand side”, said PVM analyst Tamas Varga.

Investors also digested the Bank of England’s decision to keep its main interest rate unchanged at a 16-year high of 5.25 per cent ahead of Britain’s national election on July 4.

Higher interest rates increase the cost of borrowing, which can slow economic activity and dampen demand for oil.